The Roaring Twenties was known as the decade of the flapper, jazz, speakeasies and the Harlem Renaissance. It was also the time when NYSTRS was born. Read on for an overview of the System’s history.
In 1921, the New York State Legislature had the foresight to create a retirement system that would provide a secure, stable pension for public school teachers. This year we proudly celebrate that remarkable accomplishment with the New York State Teachers’ Retirement System’s 100th anniversary: 100 years of fulfilling our mission to provide our members with a safe, secure defined benefit pension for life.
Our year-long anniversary celebration will include highlights of our history and stories about you – your memories, photos and reflections about NYSTRS – from the System’s official beginning to today.
"No matter what changes and challenges have come along over the years in public education, teachers and administrators could always count on a steady stream of income in retirement, thanks to their Retirement System," said David P. Keefe, a retired teacher and president of the NYSTRS Board of Trustees.
"That continues to be the sole and successful mission of NYSTRS," Keefe added, noting that "many teachers would likely point to their NYSTRS pension as one of the most significant financial benefits of a career in public education."
NYSTRS Executive Director and Chief Investment Officer Thomas K. Lee said the System has grown from its earliest days with about 20,000 members to a System now managing $120.5 billion in net assets and serving nearly 434,000 active and retired members and beneficiaries. "On this 100th anniversary, the System celebrates its remarkable history and the fact that the pension plan is nearly 100% funded," Lee said.
Lee attributed NYSTRS’ long-term success to the guidelines established early on and still followed today: "consistent receipt of required member and employer contributions; a disciplined, risk-controlled investment policy; and partnerships with top-performing fund managers."
NYSTRS also owes its strength to stable leadership and a strong governance model, Lee said. Board members, who each represent various constituents, serve as fiduciaries responsible for protecting the long-term value of the System’s investment portfolio and providing benefit security for members. In addition, the System has had only six executive directors during the past 100 years. A stable leadership adds to organizational stability.
The Early Years
Back in the early 1920s, it was common for teacher contracts to include archaic rules forbidding a female teacher from going out after 8 p.m. and from riding in cars with any man other than her father or brother.
However, it was also a time when a very modern concept was launched: a stable, securely funded pension system to take care of teachers when they retired.
The early pension movement came to the U.S. from Europe, where pensions were created to provide retirement funds for those in the military. In America, pensions were also first applied to the military and then later to police and fire departments.
In the late 1800s, teachers in New York City created a mutual aid society to help cover the funeral expenses of deceased members. This movement expanded next into a form of life insurance plus limited sick benefits, and then eventually into a plan in 1887 to provide teachers with a permanent retirement annuity.
Similar small pension plans gradually developed in other cities around the state, and many later merged into an early state system in 1911. Unfortunately, these early plans were poorly thought-out and poorly funded.
With the statewide and remaining local systems on the brink of collapse, teachers and political leaders came together to develop a new and much more stable pension system: our modern day NYSTRS.
NYSTRS Begins Operating
The new System, to be funded by both members and employers using actuarial methods, was approved by the state Legislature on May 4, 1920 and began operating on August 1, 1921.
Membership was offered to public school teachers throughout the state, excluding New York City which had its own system. NYSTRS initially had a "Superannuation Plan," which combined a defined benefit pension based on age, service and Final Average Salary (FAS) with an annuity component based on required employee savings.
NYSTRS benefited from lessons learned from the earlier weak plans, and the new System absorbed the approximately $1.5 million in funds left from the old system. These funds allowed the new System to immediately begin serving retirees without waiting to build up a reserve.
Teachers who had had a negative experience with the earlier pension plans were initially reluctant to join the new System. Gradually, confidence grew, and the new System began enrolling teachers at a rate of 500 new members a month.
The System Board – then, as well as now – focused on establishing a fair, equitable plan based on scientific actuarial methods and sound financing. Any improvements in benefits were required to be accompanied by the means to pay for them. Thus, the System grew and quickly became a successful model for pension plan excellence.
While some communities were concerned about retirement costs, teachers and policy makers had convinced the public of the benefits a retirement system offered to schools, according to J. Albert Holbritter, a researcher who studied the early history of NYSTRS as part of a doctoral degree program at New York University and who also served in the mid-1960s as deputy executive director of NYSTRS.
"A good retirement system attracts and holds good teachers; it frees teachers from worry about old age and disability; and it provides for those who can no longer fulfill their duties," Holbritter wrote in his 1960 study A History of the New York State Teachers’ Retirement System 1921-1959. "It also made them realize that the retirement principle was coming more to be recognized as good business and not charity."
In the 1930s, delegations from other states came to New York state to study the Retirement System. In addition, a NYS Pension Commission, created in 1933 to evaluate the state’s pension systems, praised NYSTRS as an example of a sound, well-managed System.
The 1933 Pension Commission said that NYSTRS "is financially sound because contributions adequate to provide the benefits are made when the service on account of which the benefits are to be paid is rendered. The benefits are reasonable, the public knows what they cost, and receives advantages commensurate with the cost."
This statement by the Pension Commission is as true today as it was in 1933.
The System Today
NYSTRS continues to rank among the most secure and well-funded public pension plans in the country with total net assets of $120.5 billion as of June 30, 2020, according to the System’s 2020 Comprehensive Annual Financial Report (CAFR).
Benefits paid to the System’s retirees and beneficiaries totaled approximately $7.5 billion for the fiscal year ended June 30, 2020, with about 80% of those benefits paid to residents of New York state. Retiree spending, in turn, has a significant positive impact on state and local economies.
NYSTRS’ long-term investment returns remain strong and are one of the best indicators of pension plan health. The System’s 10-year and 30-returns, net of fees, were 9.6% and 8.6%, respectively.
Those numbers underscore that the System’s investment philosophy is a formula for success. We invest for the long term, we remain committed to a prudent asset allocation strategy, and we always keep our focus squarely on our overarching mission: providing our members with a secure pension.
Another indicator of pension plan strength is its funded ratio. NYSTRS’ funded ratio, as of the latest actuarial valuation on June 30, 2020, is 97.3% funded based on a market value of assets and 98.9% funded based on an actuarial value of assets. Being fully funded means NYSTRS has the assets necessary to pay all accrued benefits to our nearly 434,000 active and retired members and beneficiaries.
Your Retirement System is soundly built to last and will continue to proudly serve the public school teachers of New York state as it has done successfully for the last 100 years.